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Renewable Energy Big Pic: Part 2 (Including 19 Charts & Graphs)

Continuing on from yesterday’s “Renewable Energy Big Pic” post, here’s Renewable Energy Big Pic: Part 2. As noted yesterday, this two-post series is basically a presentation I gave to a class of renewable energy graduate students this week. Enjoy this second part, and chime in below if anything interesting or useful comes to mind.

German Solar vs US Solar

As noted yesterday, German solar and US solar have both been growing at a fast pace for several years now, and the price of solar in both countries has been dropping steadily. However, looking at the solar power capacity of each country in a relative manner, Germany has over 21 times more solar installed per capita than the US (301.47 MW per million people compared to 13.973 MW per million people).

Some comments from Berkeley Lab: “[1] German installers reported average soft costs of $0.62/W in 2011, which is roughly $2.70/W lower than the average soft costs reported by U.S. installers… [2] Customer acquisition costs averaged just $0.07/W in Germany, or roughly $0.60/W lower than in the U.S.”

Soft costs, red tape, acquisition costs — this is where the party’s happening (or not). But now that we’ve nailed down where the price difference is occurring, how about a bit of reflection on why it’s occurring?

One noticeable cause, I think, is simply that Germany has a much more mature market. (Again, it has over 20 times more solar power installed per capita than the US.) As a market matures, competition increases, there are more economies of scale, and costs come down.

Another very interesting factor worth noting is the negative effect subsidies can have on mature or maturing technologies. This is something one of the premier solar policy and finance experts in the world, Jigar Shah, focused on in an exclusive guest article for CleanTechnica a couple months ago. His article, “Are Subsidies Holding Back U.S. Solar Deployment?,” noted that solar subsidies in the US are manipulated by investors in order to get a higher return on investment. In other words, by claiming that solar systems cost more than they do, investors are able to gain more in tax credits.

Jigar noted that “solar is now cost-effective without subsidies for ideal customers in 300 utilities in 30 US states.” Thus, he advises that we cut the subsidies and watch the price of solar fall.

Another thing worth noting is that many people (including schools, government buildings, and nonprofit organizations) can’t take advantage of solar power subsidies in the US. So, it’s imperative that we not inflate the cost of solar for those potential customers with unnecessary subsidies.

I’m sure this is a controversial topic, and there’s a lot more detail to get into on that matter, but we’ll leave this summary at that for now.

Wind Subsidies

Wind power may be in a different boat, since it doesn’t lend itself to decentralized deployment as well as solar. While it is the cheapest option for new electricity in many places, pulling its subsidies or threatening to pull them has resulted in big “bust” years for US wind (and “boom” years right before those bust years). Here’s an Energy Information Administration chart on the matter:

However, I wonder what wind energy developers and investors would do if there was one day no hope of subsidies ever coming back. By bet it that they’d develop and invest a lot more than they do in non-subsidy years. If you’re missing a big tax credit one year but are hopeful it will be back the next year, why not wait it out and invest your capital in more supportive regions or countries in the meantime? (That’s probably what I’d do.)

Dirty Energy Subsidies

I don’t want to focus on this too much, since this is a post on renewable energy, not non-renewable energy (that’s catchy, isn’t it?). But the fact of the matter is, dirty energy sources have a huge bias fiscally because of the decades of massive subsidies they have been granted. This is a matter that I’ve tackled at length on a number of occasions. One key thing to note is that societal externalities (such as $500 billion a year in health costs from coal… in the US alone) are massive subsidies to the fossil fuel industries. But even beyond that, here are a couple charts from one of our Wind Power resource pages that indicate the completely imbalanced government subsidies for various energy sources:

Subsidies in first 15 years of various energy sources.

And our German writer Thomas Gerke passed this riddle on to me just before my presentation:

“What energy related number has a similar proportion:”

The answer:

“Government support for conventional and renewable energy between 1970-2012 in Germany in billion Euros:”

I’m sure the same is more or less true across the world. In my opinion, the key at this point with regards to subsides is that dirty energy subsidies need to finally be cut, for once and for all. And as part of that, pollution and other externalities need to be adequately priced. Of course, if this were done, fossil fuels would be considerably more expensive. But the fossil fuel industry is fighting such a change tooth and nail… and (so far) winning, for the most part.

Merit Order Effect

Another very interesting topic to cover when looking at the “renewable energy big picture” is the merit order effect.

For a more detailed look at this matter, check out the posts in the link above, but here’s a quick summary:

When utilities need more electricity, they buy it from competing electricity producers. Those producers make bids to offer up their electricity for purchase. To produce extra electricity, of course, coal power plants need to input more coal and natural gas power plants need to input more natural gas, which costs money. Wind and solar power producers, however, have the sun shining and the wind blowing for free. Nothing really needs to be done to take advantage of that, so the extra cost to send more electricity to the grid is essentially nil. That means that solar and wind project owners can bid down to $0 (or even lower in some instances, due to subsidies).

I think something especially worth noting here is that solar power is often most abundant during peak power demand. Providing electricity during peak demand is typically more expensive. That’s been the case for so long that it almost seems engraved in stone. However, due to this symbiosis above (and the merit order effect) solar power is chopping off high peak power prices. Here are two graphs from Germany showing this happening:

Notably, in that second graph, you can see that the price of electricity is so low in the middle of the day that it’s practically as low as electricity in the middle of the night. Typically, middle of the day electricity should be very high. But, get enough solar on the grid, and the world turns upside down.

Unfortunately, as we’ve pointed out on a couple occasions, the wholesale electricity price reductions from the merit order effect (i.e. renewable energy) aren’t always passed on to consumers via reductions in the retail price of electricity.

One would hope that’s the exception rather than the norm.

Technology

While market penetration, economies of scale, and good policies are key components of a bright, clean energy future (as well as making the price of coal and natural gas more accurately line of with the true cost of coal and natural gas), technology advancements and breakthroughs aren’t bad, either. The good news is that we’ve got news on such advancements and breakthroughs pretty much every day. Here are some recent ones regarding wind turbines:

Nonetheless, based on what we have today, cheaper energy storage could be a huge boost. It is probably the topic I’m most keen to see big news on every day. And a lot of top scientists and engineers are aware of that (not the bit about me, of course, but the bit about cheap energy storage’s huge potential). Here are a handful of companies working on what might be breakthrough energy storage technologies:

Another potential energy storage solution is simply using the batteries in electric vehicles to help balance energy supply and demand.

Mass market electric cars are growing fast and seem to be the future. Cars sit parked, out of use, approximately 95% of the time. Their batteries could be of some use while parked. I’ve heard utility company CEOs talking enthusiastically about this. Though, I’ve also seen some convincing arguments against this idea taking off. We’ll see. I don’t think it will be a silver bullet, but it could be part of the solution. And, of course, if you’ve got solar power and a plug-in electric vehicle, you could already start using your battery a bit for non-vehicle purposes.

About the Author

Zachary Shahan is tryin' to help society help itself (and other species), one letter at a time. He spends most of his time here on CleanTechnica as its director and chief editor. Otherwise, he's probably enthusiastically fulfilling his duties as the director/editor of Solar Love, EV Obsession, Planetsave, or Bikocity; or as president of Important Media. Zach is recognized globally as a solar energy, electric car, and wind energy expert. If you would like him to speak at a related conference or event, connect with him via social media: ZacharyShahan.com.

“In other words, by claiming that solar systems cost more than they do, investors are able to gain more in tax credits.”

Seems like the solution would be to move from PTC to FiT support. A feed in tariff, a guaranteed price paid for the power over a set number of years, would encourage working to get system prices down. The less invested in the system, the higher the profit.

James Wimberley

The Perez graph is terrible. Not only does it compare annual renewable to lifeime fossil reserves. The half-shading suggests the spheres are compared by volume; is it supposed to be by area? (The same holds for the Jupiter-Earth comparison earlier).

The estimate for geothermal potential looks wrong. The reference MIT study in 2006 on EGS estimateed the recoverable annual potential for the USA alone at 1.2 – 12.2 TW; at >95% availability, that translates pretty well to TW/y. Similar surveys have not been conducted for most of the globe, but other continental masses are not likely to be enormously different to North America on the large scale. That would give 10-100 YW/y for the world, an order of magnitude higher than Perez. Mind, you, ¨recoverable¨ depends on what technology is available. Drill deep enough, and the geothermal resource is for all practical purposes unlimited.

JMin2020

Hello Zach. Thanks again for an informative post. My most imporyant takeaway from this article is the eventual downside to the subsidiezed renewables via the soft cost abberration on the part of investors adverse effect upon the growth of the industry. The long term investment is being put at risk for high short term gains. This phenomena or manifestation will no doubt prove to be migtatory to other renewables as well. It would appear that some prudent investment strategy would be healthy advice for the investment sector.

http://zacharyshahan.com/ Zachary Shahan

Yeah, this is really something you don’t see much mention of. A huge thanks to Jigar for chiming in with a post about this. I’m keeping an eye out for more on this, for sure, and hope it can be resolved well & not repeated.

Wind Energy

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